Asymmetries and double standards

Von By Rubens Ricupero

The wide fluctuations of oil prices over the last few years are a reminder of the high level of uncertainty that still surrounds world economic performance. It is also proof that, despite excessive heralding of the "new economy", we remain as dependent as ever on oil, especially for transportation. The era of cheap oil may or may not be behind us. But there is little doubt that the years of depressed prices -1986 to 1999- stoked demand for the commodity in the industrial countries and everywhere else, discouraged new investment in production and refining, and delayed moves to alternative energy sources and more environment-friendly technologies.

All of this only increased the volatility of the market. For oil-importing developing countries faced with high import bills, compensatory financing from multilateral institutions on soft terms should be considered. The World Bank's announcement that it would make structural loans and other forms of emergency funding available to oil-importing countries is a step in the right direction. In fact, such funding should be offered to all developing countries according to their payment positions. On the other hand, we should not ignore the circumstances and problems of oil-producing countries, for which oil, a non-renewable resource, is a major - and in some cases the only - source of revenue and the basis for future economic development and diversification. It is only to be expected that these countries would seek stable and remunerative prices for their main export. It is clear that we need policies and measures which will ensure both fair prices for producers and fair prices for consumers. This issue must be given a prominent place on the future international agenda. Top billing should also be given to the issue of energy conservation. Over the longer term, the challenge is to create a truly global and participatory approach to managing the world's non-renewable resources. Continued economic growth in this decade will require increases in energy demand, particularly for oil. Investments in expanding production capacities in major oil-producing countries will be essential but remain problematic for a number of reasons, including financial constraints, volatility in oil prices, and a lack of market predictability and transparency.

The lack of transparency has often resulted in decision-making without adequate information on plans by producing and consuming countries with respect to levels of production, trade, and consumption.

An oil crisis due to a lack of production or refining capacities, such as the one experienced last year, is indeed ironic in the midst of plentiful oil reserves. Relying solely on market forces has proved inadequate and generated a massive misallocation of resources and instability in energy markets. In this respect, dialogue and cooperation between the owners of plentiful oil reserves on the one hand, and the coordinators of finance and technologies on the other, has become more important than ever before. The industrial countries' call for coordinated policy action after major increases in oil prices last year is undoubtedly welcome.

However, it contrasts sharply with the indifference those countries showed to similar calls from the developing world, which was reeling from the devastating consequences of falling commodity prices, most of which remain at the depressed levels of 1998. Oil-importing developing countries thus have the worst of both worlds: they pay more for imported oil but still receive little for their exports, and at a time when official development aid (ODA) in real terms is the lowest in 20 years.

World commodity markets must receive continuous attention - not just when spikes in oil prices threaten to disrupt the leading economies. Asymmetries and double standards prejudicial to developing countries are also present in the multilateral trading system, particularly as regards the balance of mutual rights and obligations, including market access.

Before we engage in a new round of trade negotiations, we should make the redress of such imbalances a priority. Pressuring developing countries to further open markets without giving them possibilities to export and find their way out of poverty and under-

development is a short-sighted approach. The risk is that these countries will be unable to obtain the resources needed to pay for imports of capital goods and technology from industrial countries without increasing their debt, and that their markets will simply dry up. The least developed countries (LDCs) are facing the greatest challenge of our time: eradicating poverty through sustained development. This challenge, by its very nature, must also be addressed by the international community.